Equity Group chief executive officer James Mwangi. FILE PHOTO | NMG Equity Group net profit for the full-year to December 31 doubled to Sh40.07 billion driven by huge cuts in loan loss provision which the lender reduced from Sh26.6 billion in 2020 to Sh5.8 billion last year.
Strong loan recovery allowed the bank to claw back on the provisions as the bank saw dud loans come down from Sh59.3 billion to Sh53.8 billion.
Equity Bank boss James Mwangi said his team have committed to reduce bad loans by nearly Sh20 billion signaling an aggressive recovery strategy going forward.
The Bank will pay Sh11.3 billion in dividend, a 49.8 per cent jump from what the bank paid in 2019 of Sh7.54 billion.
Equity declared a dividend of Sh9.4 billion in 2020 but recalled to conserve cash during the Covid-19 pandemic. The lender did not declare dividends last year setting a two year freeze on payments to shareholders.
“Let me announce what my team have committed to since that it is now a public promise. They have committed to reduce net NPLs from Sh44 billion to Sh30billion,” Mr Mwangi said.
The lender also saw a jump in interest earnings to Sh94.3 billion supported by strong growth in revenues from lending to the government.
Interest income from government securities grew from Sh20.9 billion to Sh29.4 billion.
On the other hand, interest on loans to customer grew from Sh52 billion to Sh68.8 billion indicting limited margins following delays of approving risk based lending for the lender.
Equity projects higher returns from its customer loan book this year after CBK approved its lending model that will see it increase rates up to 18 per cent from current averages of about 13 per cent.
Banks have made significant profits clawing back provisions as the economy picks up and customers resume making payments after the moratorium during Covid-19 pandemic.Lenders are also applying forward-looking Ifrs9 accounting to predict future defaults and the huge cuts indicate confidence on customer repayments.